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please show work on Question 3 2. The following table shows stock prices (May 1, 2017,...

please show work on Question 3

2. The following table shows stock prices (May 1, 2017, closing), EPS 2016 actual, 2017 forecast, 2018 forecast, and 2016 dividend for the three chemical companies.
Stock Price EPS, 2016 Actual EPS, 2017 EPS, 2018 Dividend
DuPont 79.49 2.77 3.84 4.09 1.52
Dow 62.52 3.52 4.07 4.41 1.84
PPG 109.46 5.82 6.26 6.92 1.56
Given the information above, calculate PE for the three definitions of EPS, dividend yield, and dividend payout.
Price/Actual EPS Price/2017 EPS Price/2018 EPS Dividend Yield Dividend Payout
DuPont 28.70 20.70 19.44 1.91% 54.87%
Dow 17.76 15.36 14.18 2.94% 52.27%
PPG 18.81 17.49 15.82 1.43% 26.80%
3. The following table shows historical and projected annual earnings growth rates.
5-Year Historic Earnings Growth Rates 5-Year Projected Earnings Growth Rates
DuPont -2.43% 8.06%
Dow 17.39% 6.96%
PPG 10.36% 9.54%
Calculate PE to earnings growth rates (PEG), using the information above and calculations from Question 2.
Current PE / 5-Yr Historic Growth 1-Yr Ahead PE Forecast / 5-Yr Projected Growth 2-Yr-Ahead PE Forecast / 5-Yr Projected Growth
DuPont -3.32
Dow 0.40
PPG 0.92

Solutions

Expert Solution

Current PE / 5-Yr Historic Growth 1-Yr Ahead PE Forecast / 5-Yr Projected Growth 2-Yr-Ahead PE Forecast / 5-Yr Projected Growth
DuPont -3.32                                                                        2.57                                                                        2.41
Dow 0.4                                                                        2.21                                                                        2.04
PPG 0.92                                                                        1.83                                                                        1.66
Formula for PEG = PE ratio/Earnings growth rate

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